Purdue, Sacklers Facing Fight Over Evading Lawsuits

epidemic by illegally pushing sales of the addictive drug. So Perdud bankruptcy plan has been mired in controversy since the day it was filed. State attorneys general across the country are divided over Perdud proposed settlement. Twenty four states have taken specific aim at produced request to have the bankruptcy court freeze those twenty hundred cases, shielding the company and the Sackler family personally, even though the Sacklers have not

filed for bankruptcy. This week, Arizona became the first state to switch sides, coming out against Perdue in the Sackler family's attempt to get out from under litigation over their role in the opioid crisis. Joining me is a leading authority on bankruptcy law, Jay Westbrook, a professor at the University of Texas Law School. So companies filing for bankruptcy are usually given an automatic stay of litigation against them, But twenty states are opposing the court putting a hold

on more than twenty cases pending against Perdue. What's their legal basis for doing so? Well? In general, an automatic stay is automatic. That is, it goes into effect and it stops all litigation in other courts because it's important to get everybody in one place, either to resolve the litigation and the disputes among the parties or to to settle it. Very often, so that's why the automatic stay is there and why it's likely to stay there for

a while, at least temporarily. On the other hand, the states, of course, are saying that you've got this settlement going forward, and they don't think anything should happen in the case when their hands are tied and they can't do anything in court. So I suspect the bankruptcy judge is going to find a way to make sure that nothing changes except under the direction of the bankruptcy court in an orderly way. Now, Arizona was the first state to switch sides.

They joined with the states opposing Perdue on this motion. If Arizona switch asides in the whole bankruptcy proceeding, might that throw a ranch into Prdue getting a settlement, because now you'll have more states opposing the settlement than supporting it. Yes, I think it might very well throw a ranch into it. On the other hand, in the long run, though, those who are opposed to the settlement may actually benefit by the enormous power of the bankruptcy court to consolidate all

of this into one matter. The bankruptcy court has this eight power to issue injunctions and tell everybody, now shut up, sit down, and let's handle this in an orderly way all around. So I'm not sure that this won't turn out to be a good way to resolve the case without any court having the issue special injunctions for now, give the parties a chance to talk to each other, which is what the automatic state does, and see where

it goes from there. I definitely think the switching of Arizona will have a big effect against the current settlement. Jay is this bankruptcy different from others though, because you have the States claiming that Purdue and Sackler had a role in fueling the opioid crisis, and also that produce steered up to thirteen billion dollars in profits to the Sackler family. So is the judge going to feel any public pressure? Oh? Absolutely, but public pressure in these huge

what amounts to a mass tort case? That is, it's sort of like the Delcon shield or the silicon breast implants and these other things that are called mass tort cases because they involve many, many thousands of victims, in this case, perhaps the largest in history the number of people involved, although they Askedbestos cases were right up there as well in terms of hundreds of thousands of people who were affected, and any number of state and local

governments were affected. So the problem with asbestos may be the closest analogy, at least in size, to this case. This case is unique, as you say, in some important ways, but it falls into this category of a large number of people being hurt and an attempt to use the bankruptcy process in one of two ways. That is, some people will say, what's being used to try to let the Sacklers and others squirm out from under their responsibility,

and others will say, no, that's not true. We're just getting everybody together in one place in order to resolve this. How unusual would it be for the judge to shield the Sackler family from litigation when they're not filing for bankrupts See here it's perdue, that's filing. Well, that raises a very very controversial area of bankruptcy law called third party releases. Again, I can go back to the asbestos cases.

In the asbestos cases, the insurance companies, of course, we're not in bankruptcy, and what they said was, look, we'll put a whole bunch of money into the settlement with the asbestos victims in exchange for our not having any other liability, in the words, are being relieved of all additional liabilities above what we're going to promise to put to put in to deal with the asbestos victims. And that's sort of the model, and there are a number of others since then. That's sort of the model that

I think the Sackler family has in mind. That we can pay a lot, I think a billion dollars or something like that, and then we'll be done. That'll it'll be finished at that point, And of course a lot of other people are not happy at that resolution and are going to be fighting at tooth and nail in the bankruptcy court. The Wall Street Journal reported that a few other drugmakers who are facing litigation over the opioid crisis are trying are exploring a way of settling their

cases by participating in produced bankruptcy. Would that be allowed? Well, I mean, that's right in the heart of this controversy. We were talking about to what extent can you discharge liability without exposing yourself to the bankruptcy laws? And that's a very unsettled question right now. The different courts of appeals, federal courts of appeals are divided on that question. Can you do it at all? And if so, under what

circumstances is it proper? So there are a lot of very unresolved questions there, and this could be the poster child case for resolving some of those questions, quite possibly in the Supreme Court. What's the timing like on this? You know, they say that action has to be taken right away, and you have the opioid epidemic, you have two states, that settled well, I can say in a number of bankruptcies in recent years. P G and E

in California has another good example. The dators have taken the position, that is, the who filed the bankruptcy have taken the position that, oh, it's all got to be done in a hurry, you know, for this reason or that reason. It's all a big rush. And to some extent that's an advantage to them, because they have their their plans all lined up and they know what they

want to do. And the other people with a steak, like the victims of fire victims in Peach and E, and the various state parties in this one, and the various people obviously who have suffered from addiction and its consequences, all of those people are sort of disorganized and trying to get organized. So speed is an advantage to the debtors, and the courts ultimately have to say to themselves, all right, on the one hand, there is a good reason for speed,

which is often true in bankruptcy. But on the other hand, we don't want to go so fast that we let things get blown by the court that otherwise would have been caught. So there's going to be a very tough balancing act going on for the bankruptcy court in this case, the district court out there would have the possibility of taking the case away from the bankruptcy court and was volving it in the federal district court in the same district.

So that's another possibility. I don't know that that's going to happen, but it's another possibility. Thanks for being on Bloomberg Law. J that's j Westbrook, a professor at the University of Texas Law School. Thanks for listening to the Bloomberg Law podcast. You can subscribe and listen to the show on Apple Podcasts, SoundCloud, and on Bloomberg dot com slash podcast. I'm June Brasso. This is Bloomberg Ye.